Bill-Fitzgerald

Bill Fitzgerald

CLAUSES seeking to restrain employees from working for competitors after termination are often subject to varying court decisions, making this a complex and uncertain area of the law. Providing clarity on this important issue, AMMA principal employee relations consultant Bill FitzGerald summarises a recent decision handed down by Chief Justice Alan Blow in the Supreme Court of Tasmania.

CHIEF JUSTICE Alan Blow of the Supreme Court of Tasmania, has held that a former manager of Bulk Frozen Foods Pty Ltd.’s Southern Tasmanian wholesale and retail operations had to abide by the restraint clause in the employment contract he signed in April 2013.

After the manager resigned in September 2014, the food supply company sought remedy through the Supreme Court of Tasmania for a breach of contract on grounds the worker had contravened a clause restricting him from working for a competitor for a period of six months.

The former manager argued that the clause was void “for both uncertainty and unreasonableness”. The clause provided that ‘the employee will not carry out or be engaged, concerned or interested, directly or indirectly’ in 15 different categories of businesses, as any of seven employment positions, within 13 regions of Tasmania, for a period of six months.

It was argued that the constraint clause was so convoluted that it was uncertain and too far reaching that meant it was unreasonable and therefore unenforceable.

Justice Blow ruled, however, that it was sufficiently clear that the company had sought to impose a restraint that would apply for no more than six months; that would cover the whole of Tasmania; and that would prevent the manager from working for or being involved in any competing business during that period.

He said the contract provided sufficient detail on the time, geographical and categories of sales activities for him to rule that the clause was not void for uncertainty.

Justice Blow said he also could not find the clause unreasonable as the company was entitled to seek to protect the confidential commercial information given to the manager during his 17 months’ employment, particularly on customer purchasing habits and the company’s profit margins.

While only managing one of three of the company’s branches, the manager had information on all of them, including details of employee wages and conditions and the prices the company paid for merchandise.

To read the decision in full, click here.

Implications for Employers

Many companies in the resource sector seek to protect intellectual property and other confidential information by inserting restraint of employment clauses mainly to prevent staff being poached by competitors who may be advantaged by having access to such information.

The legitimacy and enforceability of such clauses is a complicated matter, often dependent on the individual circumstances of the agreement and the employee. The complexity of the job, the time and geographical restrictions may impact validity.

In this case, the employer’s right to restrain the former manager’s employment with a direct competitor was ruled valid.

As the national resource employer group, AMMA can provide legal advice and information about workplace agreements and the clauses that may affect your organisation. Contact your local AMMA office to speak to one of our workplace relations experts about your workforce.